Author: Michael Brennan
“Insolvency is not about creditor returns; it is about people.”
MILESTONES: Last week saw two significant events in my insolvency career. The first was the fifteenth anniversary of becoming a Registered Trustee in Bankruptcy. The second was the release of the report by the Parliamentary Joint Committee (PJC) on Corporations and Financial Services inquiry into corporate insolvency in Australia (the Report).
The Report was significant for me for several reasons. Being completely upfront, I was incredibly proud to have been referenced (in a positive way) in the Report on several occasions for both the submission I made, and the testimony I gave before the Committee. The other, more important reason is that the Report is a major step in the evolution of our industry.
I don’t normally spend time to lodge submissions to inquiries, but after twenty-three years in the insolvency profession, I felt it was important that the PJC Inquiry not lose sight of the end users of the regime. Micro and small businesses make up the overwhelming majority of businesses that move through the system. Insolvency is not about creditor returns; it is about people. In other inquiries, the mums and dads that drive small businesses have been ignored. I am very proud that the Committee took on board many of the issues I raised about small business decision making during a cash crisis and the real and practical issues that these business owners face.
At the heart of the Report, is a desire to simplify the insolvency regime in Australia and the call for a comprehensive review to facilitate this simplification. After years of wearing both a Liquidator and Trustee hat, the idea of having one piece of governing legislation and one Regulator is something to genuinely hope for.
In my opinion, one of the key recommendations is number two. It is an acknowledgement that in order to ascertain fitness for purpose, any review must first ascertain the actual purpose of our set of laws.
Australia’s social and economic culture is focused on winners and losers. If you don’t succeed, you are a loser. This may have been appropriate decades ago but if we want to encourage real innovation, we need to account for the fact that not everyone wins and just because you don’t win, you are not a loser. Whilst this might sound like a Grade Four running race; not everyone in business gets a prize. Some ideas don’t work out but that does not make you a failure. If I have one enduring criticism of the insolvency regime, it is that it is designed to be punitive against the lowest ethical user which in turn impacts upon everyone else. The outcome of recommendation two if adopted, must be to find a way to genuinely encourage innovation and appropriate risk taking whilst also providing rules that will be vigorously enforced against bad actors.
At over 350 pages, there is much to digest but hopefully, evolution has started.